Court Urged to Overturn Libel Award to Singer

An NBC attorney attempted Friday to persuade federal appeals court judges in Pasadena to strike down the largest libel verdict against an American news organization--a $5.3-million judgment that the network defamed singer Wayne Newton in newscasts that linked him to organized crime figures.

NBC lawyer Floyd Abrams said the stories were the product of aggressive reporting, not ill will, and should be protected by the First Amendment.

But Newton's lawyer, Morton R. Galane, urged the judges to uphold the December, 1986, verdict of a Las Vegas federal court jury that Newton had been injured unfairly by three broadcasts in 1980 and 1981.

Newton, 47, who listened to the legal arguments with his daughter and friends, said that regardless of who wins he has been injured forever.

"When someone accuses you of what I've been accused of by these people . . . the effects of what they said will last the rest of my life," the singer said outside the courtroom.

Abrams said after the hearing that the case is very important because "a loss . . . would make it very difficult for the news media to report about investigations and suspicions about public figures, particularly in their own community."

Galane agreed that the case has broad ramifications. In his brief, he asserted that there would be negative consequences for many people besides Newton if the punitive damages, which constitute $5 million of the $5.3-million verdict, are overturned.

"If such awards are prohibited, victims of malicious defamation by the mass media will have no effective remedy and the media will not be deterred from disseminating knowing or reckless falsehoods," Galane wrote.

The legal battle stems out of three newscasts by NBC's special investigative unit, headed by reporter Brian Ross and producer Ira Silverman.

The first report, on the Oct. 6, 1980, Nightly News, focused on Newton's relationship with Guido Penosi, who was described as "a New York hoodlum from the Gambino Mafia family."

The story said that Penosi was a key figure in an ongoing federal grand jury investigation of the activities of the Gambino family in Las Vegas and that investigators were looking into Newton's purchase of the Aladdin hotel-casino there. The broadcast said Frank Piccolo, a Gambino family boss in New York, had become a hidden partner in the Aladdin as a result of helping Newton take care of a problem of an undisclosed nature.

Additionally, the newscast showed Newton testifying before the Nevada Gaming Board on the subject of his relationship with Penosi. Federal authorities said Newton had not told them the whole story about the relationship, the broadcast added.

Newton's lawyers demanded a retraction four days later, calling the report "untrue and slanderous." NBC stood by the story.

The network ran two follow-up stories, one on Nov. 6, 1980, after Newton testified before a Connecticut grand jury investigating Piccolo, and another on June 12, 1981, the day Piccolo and Penosi were indicted by a federal grand jury in Connecticut on extortion charges. Piccolo was shot to death in a Bridgeport, Conn., telephone booth before the extortion trial and Penosi was acquitted.

Newton sued for libel in 1981 and after numerous delays a 37-day trial was held in 1986. The jury awarded him $19.3 million in damages.

On a verdict form, the jury said that there had been one false statement in the stories and one false impression conveyed. But the jurors did not say what they were.

Eleven months later, U.S. District Judge M.D. Crocker, who presided at the trial, reduced the award to $5.3 million. In January, 1989, Newton agreed to accept the reduced award rather than have a new trial in Los Angeles.

One issue emphasized by Abrams in the appeal is whether a broadcaster can be held liable in a defamation case based upon a "false impression" created by true statements in its broadcasts.

Abrams acknowledged that "there was no way this broadcast could have been made at all without leaving a negative impression" of Newton. But NBC did not deliberately set out to injure Newton, he said.

But Galane said Abrams had misstated the issue because the jury found that there was a false statement in the report, not merely that a false impression was conveyed. Moreover, his brief contends in detail that NBC was out to get Newton.

Appeals court Judge William Norris questioned both Abrams and Galane intensively about the extent of an appeals court's power to review jury findings in First Amendment cases involving public figures. Galane asserted that the review should be limited to the question of whether the jury had abused its discretion, while Abrams argued for a much broader review.

Norris also asked the lawyers to compare the NBC stories to articles done by Washington Post reporters Bob Woodward and Carl Bernstein on the Watergate scandal that led to the resignation of President Richard M. Nixon.